3rd January 2020 - AUD consolidates lower from recent fresh highs

• The USD snapped a four-day losing streak and global equity markets jumped at the start of 2020 with a shot of Chinese stimulus, ensuring last year's record-breaking rally remained intact.

• The number of Americans filing claims for jobless benefits edged lower last week, a positive signal for the U.S. labour market amid recent signs new claims may be trending slightly higher. Initial claims for unemployment benefits decreased 2,000 to a seasonally adjusted 222,000 for the week ended Dec. 28.

• China's factory activity expanded at a slower clip in December, pulling back from a three-year high the previous month as new orders softened. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) for December eased to 51.5 from 51.8 missing analysts' expectations that the reading would hold steady. It remained above the 50-mark that separates expansion from contraction for the fifth straight month.

• U.S. stocks extended their rally into the new year, with all three major indexes hitting record highs. Dow Jones up 0.82% at 28,771, S&P 500 up 0.54% at 3,248 and Nasdaq up 1.02% at 9,064.

CURRENCIES

• The USD recovered from a six-month low – DXY index adding 0.46% to jump up to 96.83 from 96.40.

• EUR fell from 1.1225 highs down towards 1.1162.

• JPY initially found strength, falling from 108.85 towards 108.25 but lost some gains trading back up to 108.55.

• GBP was on track for its biggest daily loss in two weeks, last trading at $1.3138, down 0.86% overnight.

• Oil prices were mostly flat, supported by signs of improving Washington-Beijing trade relations and rising tensions in the Middle East but pressured by a strong USD. Brent crude futures lost 14 cents to trade at $65.86 a barrel while U.S. WTI crude was 24 cents lower at $60.82 per barrel.

Australian yields have fallen faster than US, with AU-US spreads widening.

The next major focus for the market will be U.S. manufacturing data out tonight, which will be watched for any indications of improvement after the U.S. and China last month agreed to the first phase of a trade deal.

The FOMC meeting minutes will also be watched detailing further views on the risks into 2020. No Australian data releases today.

For now, USD holding onto gains and remains positioned for steady improvement which should see AUD weakness settle in.